Correlation Between MTN and Frontier Transport
Can any of the company-specific risk be diversified away by investing in both MTN and Frontier Transport at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining MTN and Frontier Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MTN Group and Frontier Transport Holdings, you can compare the effects of market volatilities on MTN and Frontier Transport and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in MTN with a short position of Frontier Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTN and Frontier Transport.
Diversification Opportunities for MTN and Frontier Transport
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between MTN and Frontier is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding MTN Group and Frontier Transport Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Transport and MTN is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on MTN Group are associated (or correlated) with Frontier Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Transport has no effect on the direction of MTN i.e., MTN and Frontier Transport go up and down completely randomly.
Pair Corralation between MTN and Frontier Transport
Assuming the 90 days trading horizon MTN is expected to generate 4.3 times less return on investment than Frontier Transport. But when comparing it to its historical volatility, MTN Group is 2.08 times less risky than Frontier Transport. It trades about 0.07 of its potential returns per unit of risk. Frontier Transport Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 71,028 in Frontier Transport Holdings on September 14, 2024 and sell it today you would earn a total of 5,972 from holding Frontier Transport Holdings or generate 8.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MTN Group vs. Frontier Transport Holdings
Performance |
| Timeline |
| MTN Group |
| Frontier Transport |
MTN and Frontier Transport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MTN and Frontier Transport
The main advantage of trading using opposite MTN and Frontier Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTN position performs unexpectedly, Frontier Transport can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Frontier Transport will offset losses from the drop in Frontier Transport's long position.The idea behind MTN Group and Frontier Transport Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Frontier Transport vs. Sasol Ltd Bee | Frontier Transport vs. Centaur Bci Balanced | Frontier Transport vs. Sabvest Capital | Frontier Transport vs. Growthpoint Properties |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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